FPIs pump $4 bn in May to keep Indian stock markets buoyant

29 May 2017

Foreign investors have pumped in nearly $4 billion into the country's capital market so far this month against $3.5 billion invested in the whole of April, as market regulator Sebi raised the investment limit for FPIs in government debt and on strong economic outlook.

Most of the funds invested by the foreign portfolio investors (FPIs) are in the debt markets. According to latest depository data, FPIs invested a net Rs9,007 crore in equities during 2-26 May, while they poured Rs15,769 crore into the debt markets during the period, which takes net inflows to Rs24,776 crore ($3.85 billion).

This has helped the country's two main stock market indices, the benchmark 30-share Sensex and the Nifty 50 index, closed at record highs on Friday.

On Friday, the benchmark 30-share Sensex index closed at 31,028.21 points, up 278.18 points or 0.9 per cent and the Nifty 50 jumped by the same percentage or 85.35 points to 9,595.10.

The figures show a continuing stream of foreign investments since February this year. FPIs have invested close to Rs94,900 crore in the last three months (February-April) on the back of a strong show by the ruling party at the centre in state elections and on expectations that the roll-out of the goods and services tax (GST) as the government accelerated the pace of reforms.

With the latest inflow, total investment in capital markets (equity and debt) has reached over Rs1,16,000 crore this year.

Foreign investors had pulled out Rs3,496 crore from the debt markets in January.

According to the depository data, FPIs infused a net sum of Rs2,394 crore in equities in April and another Rs20,364 crore in the debt segment, translating into a combined inflow of Rs22,758 crore ($3.5 billion).

This follows a record net inflow of Rs56,944 crore ($8.7 billion) in the previous month, mainly on expectations that BJP's victory in the recently held assembly polls would lead to faster reforms.

In February, FPIs had made a net investment of Rs15,862 crore in equity and debt markets. Prior to that, FPIs had pulled out more than Rs80,000 crore between October 2016 and January 2017.

Meanwhile, P-note investments by foreign investors in India hit 4-month low of Rs1,68,000 crore at the end of April amid stringent norms put in place by Sebi to curb the inflow of illicit funds.

P-notes are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They, however, need to go through a proper due diligence process.

According to Sebi, the total value of P-note investments in Indian markets equity, debt and derivatives declined to Rs1,68,545 crore at April-end, from Rs1,78,437 crore at the end of March.

This was the lowest level of investment through the route since December, when the cumulative value of such investment stood at Rs1,57,000 crore.